THE PACIFIC island-state of Nauru, once abundant in phosphates deposited by birds, now lies devastated and desolate. Most of the phosphate was mined by Australia and royalties made the Nauruans one of the richest people in the world. Now, they are left without any natural resources and only an investment trust of $1 billion. Many islanders, not the world's best investors, feel even a lot of this money has been frittered away.

Mercifully enough, Australian Prime Minister Paul Keating announced recently that Nauru would be compensated for the environmental damage caused by the mining. While the gesture sets a legal precedent, the question of how environmental costs should be calculated remains unanswered.

Notwithstanding that Nauruan president Bernard Dowiyogo has referred to the compensation as generous, $73 million is not enough to brighten up the Nauruan economy immediately. But as a legal precedent, the gesture has strong global significance.

All former British colonies whose forests and natural wealth were ravaged can now call up trumps. Australian capitulation could mean compensation claims for imperially ravaged forests of Africa, India or, for that matter, Ireland.

Moreover, Australia wants Britain and New Zealand to share the Nauru compensation bill, which brings forth another important aspect of the deal. Countries forced to pay compensation will put pressure on other countries to dish out their share of the compensation as well. Will we then see a day when Northern countries start acting as watchdogs on other Northern nations shying away from their global responsibilities? Irrespective of the actual impact of the Australian gesture, which still remains questionable, we can say that "the quality of mercy is not strained."